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Simple Interest
You just bought a quality used car from
your Aunt for $3,000. She agreed to let
you make payments for 3 years with
simple interest at 6 percent. After you
have paid her back fully and on time, how
much did the car actually cost?
Do you think this is a good deal?
Simple Interest
I=3000 X .06 X 3
The Simple Interest is…
$540
Total Amount of the Loan is...$3540
Is this a good deal?
Simple Interest
Name any items or purchases
that usually requires a person
to get a LOAN.
Credit Card Rate Report
Updated: 03-26-2012
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National Average
Low Interest
Balance Transfer
Business
Student
Cash Back
Airline
Reward
Instant Approval
Bad Credit
15.00%
10.40%
12.60%
13.13%
13.77%
14.45%
14.63%
14.83%
15.49%
23.64%
Simple Interest
You will learn how banks calculate
the amount in dollars to be repaid,
when money is borrowed.
Otherwise known as…..
Simple Interest
I=PRT
"P" is the Principal and is the amount you borrow.
"R" is the Rate in percent.
"T" is the Time in years.
Simple Interest
Interest paid on the initial
investment (the principal) only.
Simple Interest
When banks use simple interest,
they consider the principal, the
interest rate, and the length of
time of the loan.
Simple Interest
"P" How much is the principal?
"R" What is the Rate?
"T" What is the time?
Simple Interest
"P" $100
"R" 10%
"T" 2 years
Simple Interest
What is the Total Amount Owed?
$120
Simple Interest
practice
You get a loan for a
boat in the amount of
$7000 at 6% for 5 years.
Simple Interest
I=PRT
"P" is $7000
"R" 6% (or .06)
"T" 5 Years
Simple Interest
practice
I = $7000 at 6% for 5 years
I = 7000 X .06 X 5
I = 420 X 5
I = $2100
Total Money Owed: $2100 + $7000 = $9100
Simple Interest
practice
You get a loan to move
for the amount of $2500
at 4% for 6 months.
Simple Interest
I=PRT
"P" is $2500
"R" 4% (or .04)
"T" 6 months = ½ Year = .5
Simple Interest
I=2500 X .04 X .5
The Simple Interest is…
$50
Total Amount of the Loan is...$2550
Now You will practice.
• Complete the following chart.
• You will trade with the awesome person
sitting next to you and check answers.
Roll Call
What is Simple Interest?
Interest paid on the initial
investment (the principal) only.
What is….
I=PRT?
"P" is the Principal and is the amount you borrow.
"R" is the Rate in percent.
"T" is the Time in years.
After you figure out Simple
Interest you will know if
you can afford to pay for
things such as……
Additional Assignment
• Find out from your parents
personal bank what the current
interest rates are for:
• MORTGAGE
• CAR LOAN
• CD’s